TCBK TriCo Bancshares

TriCo Bancshares (NASDAQ:TCBK) (the "Company"), parent company of Tri Counties Bank (the “Bank”), today announced quarterly earnings of $2,800,000 for the quarter ended March 31, 2011. These earnings represent a $1,242,000 (79.7%) increase when compared to earnings of $1,558,000 reported for the quarter ended March 31, 2010. Diluted earnings per share for the quarter ended March 31, 2011 was $0.17 compared to diluted earnings per share of $0.10 for the quarter ended March 31, 2010.

Included in the Company’s results for the three month period ended March 31, 2011 is the acquisition of the banking operations of Granite Community Bank (“Granite”), Granite Bay, California from the FDIC under a whole bank purchase and assumption agreement with loss sharing on May 28, 2010 by Tri Counties Bank. The assets acquired and liabilities assumed in the Granite acquisition have been accounted for under the acquisition method of accounting (formerly the purchase method). The acquired loan portfolio and foreclosed assets are referred to as “covered loans” and “covered foreclosed assets”, respectively. Collectively these balances are referred to as “covered assets”.

Total assets of the Company increased $25,151,000 (1.2%) to $2,195,738,000 at March 31, 2011 from $2,169,587,000 at March 31, 2010. Total loans of the Company decreased $64,145,000 (4.4%) to $1,387,660,000 at March 31, 2011 from $1,451,805,000 at March 31, 2010. The decrease in loans is net of $64,802,000 of loans acquired in the acquisition of the banking operations of Granite. Total deposits of the Company increased $26,615,000 (1.5%) to $1,859,912,000 at March 31, 2011 from $1,833,297,000 at March 31, 2010. The increase in deposits is net of $95,001,000 of deposits acquired in the Granite acquisition on May 28, 2010, and a $70,000,000 decrease in certificates of deposit issued to the State of California during the fourth quarter of 2010. The following is a summary of the components of net income for the periods indicated:

       

Three months endedMarch 31,

(in thousands) 2010 2010

$ Change

% Change Net Interest Income $ 21,704 $ 21,978 ($274 ) (1.2 %) Provision for loan losses (7,001 ) (8,500 ) 1,499 (17.6 %) Noninterest income 9,350 7,547 1,803 23.9 % Noninterest expense (19,671 ) (18,803 ) (868 ) 4.6 % Provision for income taxes   (1,582 )   (664 )   (918 ) 138.3 % Net income $ 2,800   $ 1,558   $ 1,242   79.7 %  

Net interest income during the first quarter of 2011 decreased $274,000 (1.2%) from the same period in 2010 to $21,704,000. The decrease in net interest income was due to a 0.09% (nine basis points) decrease in net interest margin on a fully tax-equivalent basis to 4.31% and a $73,354,000 (5.0%) decrease in average balance of loans. Much of the nine basis point decrease in net interest margin was due to the fact that despite historically low deposit rates, deposit balances continue to grow while the ability to deploy these growing deposits into some interest-earning asset other than short-term low-yield interest-earning cash at the Federal Reserve Bank has been limited. This limitation is the result of weak loan demand and investment yields that have been unattractive given their interest rate risk profile.

The following table details the components of the net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the periods indicated:

           

Three months endedMarch 31, 2011

Three months endedMarch 31, 2010

AverageBalance

 

Income/Expense

 

Yield/Rate

AverageBalance

 

Income/Expense

 

Yield/Rate

Assets: Loans $ 1,396,331 $ 21,722 6.22 % $ 1,469,685 $ 22,813 6.21 % Investment securities - taxable 276,497 2,381 3.44 % 265,177 2,761 4.16 % Investment securities - nontaxable 12,063 223 7.38 % 17,310 331 7.64 % Cash at Federal Reserve and other banks   339,394   191 0.23 %   256,724   154 0.24 % Total earning assets 2,024,285   24,517 4.84 % 2,008,896   26,059 5.19 % Other assets   165,078   160,242 Total $ 2,189,363 $ 2,169,138   Liabilities and shareholders' equity: Interest-bearing demand deposits 402,267 349 0.35 % 368,660 615 0.67 % Savings deposits 592,084 367 0.25 % 522,246 642 0.49 % Time deposits 432,166 1,111 1.03 % 560,266 1,801 1.29 % Other borrowings 59,223 593 4.01 % 61,843 594 3.84 % Junior subordinated debt   41,238   310 3.01 %   41,238   306 2.97 % Total interest-bearing liabilities 1,526,978   2,730 0.72 % 1,554,253   3,958 1.02 % Noninterest-bearing deposits 425,089 374,018 Other liabilities 33,761 36,667 Shareholders' equity   203,535   204,200 Total liabilities and shareholders' equity $ 2,189,363 $ 2,169,138   Net interest rate spread(1) 4.12 % 4.17 % Net interest income and interest margin(2) $ 21,787 4.31 % $ 22,101 4.40 %  

The Company provided $7,001,000 for loan losses in the first quarter of 2011 versus $8,144,000 in the fourth quarter of 2010 and $8,500,000 in the first quarter of 2010. The allowance for loan losses increased $653,000 from $42,571,000 at December 31, 2010 to $43,224,000 at March 31, 2011. The provision for loan losses and increase in the allowance for loan losses during the first quarter of 2011 were primarily the result of changes in the make-up of the loan portfolio and the Bank’s loss factors in reaction to increased losses in the construction, commercial real estate, commercial & industrial (C&I), home equity and auto indirect loan portfolios.

Noninterest income for the three months ended March 31, 2011 was $9,350,000, an increase of $1,803,000 (23.9%) compared to the same period in 2010. The following table presents the key components of noninterest income for the periods indicated:

       

Three months endedMarch 31,

(in thousands) 2011 2010

$ Change

% Change Service charges on deposit accounts $ 3,430 $ 3,778 ($348 ) (9.2 %) ATM fees and interchange 1,645 1,368 277 20.2 % Other service fees 406 331 75 22.7 % Mortgage banking service fees 361 307 54 17.6 % Change in value of mortgage servicing rights   (60 )   (49 )   (11 ) 22.4 % Total service charges and fees   5,782     5,735     47   0.8 %   Gain on sale of loans 725 585 140 23.9 % Commission on NDIP 360 267 93 34.8 % Increase in cash value of life insurance 450 426 24 5.6 % Change in indemnification asset 1,692 - 1,692 Gain (loss) on sale of foreclosed assets 200 40 160 400.0 % Legal settlement - 400 (400 ) (100.0 %) Sale of customer checks 59 48 11 22.9 % Lease brokerage income 33 37 (4 ) (10.8 %) Gain (loss) on disposal of fixed assets (9 ) (25 ) 16 (64.0 %) Commission rebates (17 ) (16 ) (1 ) 6.3 %

Other noninterest income

  75     50     25   50.0 % Total other noninterest income   3,568     1,812     1,756   96.9 % Total noninterest income $ 9,350   $ 7,547   $ 1,803   23.9 %  

Service charges on deposit accounts were down $348,000 (9.2%) due to new overdraft regulations that became effective on July 1, 2010 and caused a decrease in non-sufficient funds fees. ATM fees and interchange income was up $277,000 (20.2%) due to increased customer point-of-sale transactions that are the result of incentives for such usage. Overall, mortgage banking activities, which includes mortgage banking servicing fees, change in value of mortgage servicing rights, and gain on sale of loans, accounted for $1,026,000 of noninterest income during the three months ended March 31, 2011 compared to $844,000 during the three months ended March 31, 2010. Commissions on sale of nondeposit investment products increased $93,000 (34.8%) during the three months ended March 31, 2011. The change in indemnification asset of $1,692,000 recorded during the three months ended March 31, 2011 is primarily due to an increase in estimated loan losses from the loan portfolio and foreclosed assets acquired in the Granite acquisition on May 28, 2010, and the fact that such losses are generally “covered” at the rate of 80% by the FDIC. The actual increase in estimated losses is reflected in decreased interest income, increased provision for loan losses and/or increased provision for foreclosed asset losses.

Noninterest expense for the three months ended March 31, 2011 was $19,671,000, an increase of $868,000 (4.6%), as compared to the same period in 2010. The following table presents the key components of noninterest expense for the periods indicated:

 

Three months endedMarch 31,

    (in thousands) 2011   2010

$ Change

% Change Salaries $ 7,004 $ 6,974 $ 30 0.4 % Commissions and incentives 916 546 370 67.8 % Employee benefits   2,873   2,630   243   9.2 % Total salaries and benefits expense   10,793   10,150   643   6.3 %   Occupancy 1,460 1,329 131 9.9 % Equipment 921 974 (53 ) (5.4 %) Change in reserve for unfunded commitments 50 - 50 Data processing and software 852 675 177 26.2 % Telecommunications 406 413 (7 ) (1.7 %) ATM network charges 482 458 24 5.2 % Professional fees 287 716 (429 ) (59.9 %) Advertising and marketing 432 521 (89 ) (17.1 %) Postage 216 247 (31 ) (12.6 %) Courier service 208 197 11 5.6 % Intangible amortization 85 65 20 30.8 % Operational losses 109 67 42 62.7 % Provision for foreclosed asset losses 449 - 449 Foreclosed asset expense 167 197 (30 ) (15.2 %) Assessments 867 784 83 10.6 % Other   1,887   2,010   (123 ) (6.1 %) Total other noninterest expense   8,878   8,653   225   2.6 % Total noninterest expense $ 19,671 $ 18,803 $ 868   4.6 %  

Salary and benefit expenses increased $643,000 (6.3%) to $10,793,000 during the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Base salaries increased $30,000 (0.4%) to $7,004,000 during the three months ended March 31, 2011. The increase in base salaries was mainly due to a 2.9% increase in average full time equivalent staff to 670 that was substantially offset by increased deferral of loan origination related salaries due to increased loan production when compared to the three months ended March 31, 2010. Incentive and commission related salary expenses increased $370,000 (67.8%) to $916,000 during three months ended March 31, 2011 due primarily to increases in production related incentives and incentives tied to net income. Benefits expense, including retirement, medical and workers’ compensation insurance, and taxes, increased $243,000 (9.2%) to $2,873,000 during the three months ended March 31, 2011 primarily due to increases in stock option vesting and supplemental retirement plan expenses.

Other noninterest expenses increased $225,000 (2.6%) to $8,878,000 during the three months ended March 31, 2011 when compared to the three months ended March 31, 2010. Changes in the various categories of other noninterest expense are reflected in the table above. The changes are indicative of the economic environment which has led to increases, or fluctuations, in professional loan collection expenses, provision for foreclosed asset losses, and foreclosed asset expenses. Occupancy and equipment expenses increased primarily due to one new branch opening in each of the first and second quarters of 2010, and two branches acquired in the Granite acquisition on May 28, 2010.

The effective tax rate on income was 36.1% and 29.9% for the three months ended March 31, 2011 and 2010, respectively. The effective tax rate was greater than the federal statutory tax rate due to state tax expense of $381,000 and $151,000, respectively, in these periods. Tax-exempt income of $140,000 and $208,000, respectively, from investment securities, and $450,000 and $426,000, respectively, from increase in cash value of life insurance in these periods, along with relatively low levels of net income before taxes, helped to reduce the effective tax rate.

In addition to the historical information contained herein, this press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The reader of this press release should understand that all such forward-looking statements are subject to various uncertainties and risks that could affect their outcome. The Company’s actual results could differ materially from those suggested by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, variances in the actual versus projected growth in assets, return on assets, interest rate fluctuations, economic conditions in the Company's primary market area, demand for loans, regulatory and accounting changes, loan losses, expenses, rates charged on loans and earned on securities investments, rates paid on deposits, competition effects, fee and other noninterest income earned as well as other factors detailed in the Company's reports filed with the Securities and Exchange Commission which are incorporated herein by reference, including the Form 10-K for the year ended December 31, 2010. These reports and this entire press release should be read to put such forward-looking statements in context and to gain a more complete understanding of the uncertainties and risks involved in the Company's business. Any forward-looking statement may turn out to be wrong and cannot be guaranteed. The Company does not intend to update any of the forward-looking statements after the date of this release.

TriCo Bancshares and Tri Counties Bank are headquartered in Chico, California. Tri Counties Bank has a 36-year history in the banking industry. It operates 34 traditional branch locations and 27 in-store branch locations in 23 California counties. Tri Counties Bank offers financial services and provides a diversified line of products and services to consumers and businesses, which include demand, savings and time deposits, consumer finance, online banking, mortgage lending, and commercial banking throughout its market area. It operates a network of 69 ATMs and a 24-hour, seven days-a-week telephone customer service center. Brokerage services are provided by the Bank’s investment services affiliate, Raymond James Financial Services, Inc. For further information please visit the Tri Counties Bank web site at http://www.tricountiesbank.com.

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in thousands, except share data)         Three months ended March 31,2011   December 31,2010   September 30,2010   June 30,2010   March 31,2010 Statement of Income Data         Interest income $ 24,434 $ 25,627 $ 27,233 $ 25,776 $ 25,936 Interest expense 2,730 3,036 3,497 3,642 3,958 Net interest income $ 21,704 $ 22,591 23,736 22,134 21,978 Provision for loan losses 7,001 8,144 10,814 10,000 8,500 Noninterest income: Service charges and fees 5,782 6,045 5,237 6,082 5,735 Other income 3,568 3,836 1,926 2,022 1,812 Total noninterest income 9,350 9,881 7,163 8,104 7,547 Noninterest expense:

Base salaries net of deferred loan origination costs

$ 7,004 $ 7,160 7,131 6,990 6,974 Incentive compensation expense 916 478 294 526 546

Employee benefits and other compensation expense

2,873 2,434 2,473 2,469 2,630 Total salaries and benefits expense $ 10,793 $ 10,072 9,898 9,985 10,150 Other noninterest expense 8,878 9,398 10,626 8,423 8,653 Total noninterest expense $ 19,671 19,470 20,524 18,408 18,803 Income (loss) before taxes $ 4,382 $ 4,858 (439 ) 1,830 2,222 Net income $ 2,800 $ 3,126 $ 1 $ 1,320 $ 1,558 Share Data Basic earnings per share $ 0.18 $ 0.20 $ 0.00 $ 0.08 $ 0.10 Diluted earnings per share $ 0.17 $ 0.20 $ 0.00 $ 0.08 $ 0.10 Book value per common share $ 12.72 $ 12.64 $ 12.66 $ 12.76 $ 12.63 Tangible book value per common share $ 11.71 $ 11.62 $ 11.64 $ 11.74 $ 11.63 Shares outstanding 15,860,138 15,860,138 15,860,138 15,860,138 15,860,138 Weighted average shares 15,860,138 15,860,138 15,860,138 15,860,138 15,822,789 Weighted average diluted shares 16,023,589 16,009,538 15,972,826 16,107,909 16,073,875 Credit Quality Nonperforming loans $ 71,053 $ 75,987 $ 84,983 $ 72,708 $ 70,284 Guaranteed portion of nonperforming loans(2) 3,736 3,937 4,131 4,674 4,853 Foreclosed assets, net of allowance 8,983 9,913 11,172 9,945 5,579 Loans charged-off 7,049 6,040 11,163 8,424 8,101 Loans recovered 701 1,698 689 513 468 Allowance for losses to total loans(1) 3.31 % 3.18 % 2.86 % 2.75 % 2.75 % Allowance for losses to NPLs(1) 65 % 59 % 49 % 57 % 57 % Allowance for losses to NPAs(1) 57 % 53 % 43 % 50 % 53 % Selected Financial Ratios Return on average total assets 0.51 % 0.56 % 0.00 % 0.24 % 0.29 % Return on average equity 5.50 % 6.14 % 0.00 % 2.61 % 3.05 % Average yield on loans 6.22 % 6.39 % 6.61 % 6.20 % 6.21 % Average yield on interest-earning assets 4.84 % 4.88 % 5.31 % 5.13 % 5.19 % Average rate on interest-bearing liabilities 0.72 % 0.76 % 0.87 % 0.92 % 1.02 % Net interest margin (fully tax-equivalent) 4.31 % 4.30 % 4.63 % 4.41 % 4.40 %

 

 

(1)   Allowance for losses includes allowance for loan losses and reserve for unfunded commitments. (2)

Portion of nonperforming loans guaranteed by the U.S. Government, including its agencies and its government-sponsored agencies.

  TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA (Unaudited. Dollars in thousands)       Three months ended Balance Sheet Data March 31,2011   December 31,2010   September 30,2010   June 30,2010   March 31,2010 Cash and due from banks $ 406,294   $ 371,066   $ 398,191   $ 322,644   $ 308,664 Securities, available-for-sale 279,824 277,271 250,012 275,783 292,065 Federal Home Loan Bank Stock 9,133 9,133 9,157 9,523 9,274 Loans held for sale 2,834 4,988 9,455 4,153 3,384 Loans: Commercial loans 131,242 141,902 149,743 162,898 147,988 Consumer loans 388,142 423,238 436,597 434,943 444,831 Real estate mortgage loans 823,563 807,482 821,562 860,615 810,386 Real estate construction loans 44,713 46,949 44,890 42,484 48,600 Total loans, gross 1,387,660 1,419,571 1,452,792 1,500,940 1,451,805 Allowance for loan losses (43,224 ) (42,571 ) (38,770 ) (38,430 ) (36,340 ) Foreclosed assets 8,983 9,913 11,172 9,945 5,579 Premises and equipment 18,552 19,120 18,947 19,001 19,178 Cash value of life insurance 50,991 50,541 49,972 49,546 49,120 Goodwill 15,519 15,519 15,519 15,519 15,519 Intangible assets 495 580 665 750 260 Mortgage servicing rights 4,808 4,605 3,905 4,033 4,310 FDIC indemnification asset 6,689 5,640 5,098 7,515 - Accrued interest receivable 6,941 7,131 7,318 7,472 7,715 Other assets 40,239 37,282 36,185 36,251 39,054 Total assets 2,195,738 2,189,789 2,229,618 2,224,645 2,169,587 Deposits: Noninterest-bearing demand deposits 427,116 424,070 389,315 386,617 378,695 Interest-bearing demand deposits 406,060 395,413 383,859 383,578 375,313 Savings deposits 608,582 585,845 577,603 552,616 533,115 Time certificates 418,154 446,845 537,764 567,138 546,174 Total deposits 1,859,912 1,852,173 1,888,541 1,889,949 1,833,297 Accrued interest payable 2,044 2,151 2,368 2,487 3,064 Reserve for unfunded commitments 2,690 2,640 2,840 2,840 3,640 Other liabilities 30,262 29,170 26,721 25,257 27,112 Other borrowings 57,781 62,020 67,182 60,452 60,952 Junior subordinated debt 41,238 41,238 41,238 41,238 41,238 Total liabilities 1,993,927 1,989,392 2,028,890 2,022,223 1,969,303 Total shareholders' equity 201,811 200,397 200,728 202,422 200,284

Accumulated other comprehensive gain (loss)

 

1,086 1,310 3,606 4,132 2,053 Average loans 1,396,331 1,443,603 1,481,497 1,463,473 1,469,685 Average interest-earning assets 2,024,285 2,107,499 2,060,108 2,019,684 2,008,896 Average total assets 2,189,363 2,235,471 2,237,670 2,191,660 2,169,138 Average deposits 1,851,606 1,895,006 1,893,677 1,849,118 1,825,190 Average total equity $ 203,535 $ 203,712 $ 205,324 $ 203,528 $ 204,200 Total risk based capital ratio 14.5 % 14.2 % 13.8 % 13.6 % 13.5 % Tier 1 capital ratio 13.2 % 12.9 % 12.6 % 12.3 % 12.3 % Tier 1 leverage ratio 10.3 % 10.0 % 9.9 % 10.2 % 10.3 % Tangible capital ratio 8.5 % 8.5 % 8.3 % 8.4 % 8.6 %